Uncertainty surrounds Trump’s policy on trade

After a campaign defined in large part by a pledge to turn the nation’s trade agenda on its head, President Trump has opened his presidency with a series of modest, more cautious steps – leaving protectionists and free-trade advocates alike wondering if Trump is ramping up to deliver on his promises or pulling back from them entirely.

A draft letter from the administration to Congress that leaked this week called for maintaining the North American Free Trade Agreement largely as it currently exists – after Trump during the campaign called the agreement the “the worst trade deal maybe ever signed anywhere.”

On Thursday, Trump’s commerce secretary announced a set of small-bore duties on a few specific types of imported steel plate – and then went on cable television the next morning to proclaim that the United States is in a “trade war” with the world.

The uncertainty was on display in microcosm Friday when, after speaking at a White House event on a pair of trade-related executive actions, Trump left the room with the official documents waiting for him on the desk beside the podium – unsigned. The White House confirmed the president later signed the papers, ordering studies and reviews that further frustrated advocates of free trade without satisfying protectionists.

The questions about Trump’s trade plans take on new urgency this week ahead of his first meeting with President Xi Jinping of China, scheduled for Thursday and Friday at the president’s Mar-a-Lago Club in Florida. The Chinese are eagerly awaiting answers on whether the United States will support granting the country status as a market economy under international law, a status that would protect Chinese products from certain tariffs.

“It is all about trade,” Trump said of his meeting with Xi in an interview with the Financial Times. Trump argued that Chinese producers have an advantage because of tariffs and the value of the renminbi, and that U.S. negotiators could use trade to secure Chinese cooperation on North Korea and other security issues.

“We cannot continue to trade if we are going to have an unfair deal like we have right now,” Trump said. “When you talk about currency manipulation, when you talk about devaluations, they are world champions. And our country hasn’t had a clue.”

INTERNAL DISPUTE?

Some outside observers believe the contradictory trade signals reflect an internal dispute among Trump’s advisers – between populists who favor more restrictions on trade, such as chief strategist Stephen K. Bannon, and Wall Street veterans such as National Economic Council director Gary Cohn.

Both proponents and skeptics of trade are waiting for the result.

The public is “definitely seeing mixed signals coming out of the administration,” said Thea Lee, an AFL-CIO economist. “They aren’t resolving their issues inside. Some of them are bubbling over.”

Claude Barfield, an expert on trade at the conservative American Enterprise Institute, predicted “continual debate about this internally” among Trump’s staff. “It will be one way one day, and another way another day, as they try to pick and feel their way through this trade minefield,” Barfield said.

The letter on NAFTA, dated March 22 and first reported by the Wall Street Journal, was a draft of a formal notification that the administration will have to send to Congress to begin the process of renegotiating the agreement. Trump has pledged to revise the accord, signed by President Clinton, or to withdraw if Mexico and Canada will not agree to make changes.

Yet apart from passages calling for limiting federal procurement to U.S. firms and restricting the amount of parts and raw materials from outside North America that can be traded among the three countries at NAFTA’s preferential rates, the draft of the letter only endorsed minor changes to the agreement.

“The NAFTA notification was clearly inadequate, and a disappointment given all the rhetoric and campaign promises on that front,” Lee said.

That rhetoric continued throughout the week. “We are in a trade war. We have been for decades,” Commerce Secretary Wilbur Ross said on CNBC’s “Squawk Box” Friday morning. “The only difference is that our troops are finally coming to the rampart.”

It was not the first time Ross had used that line, but the contrast between his bellicose tone and the emerging lack of direction from the administration on trade was clearer than before.

The previous evening, Ross had announced a set of new retaliatory duties on steel plate from Austria, Belgium, France, Germany, Italy, Japan, Korea and Taiwan. The duties follow a finding by the Commerce Department that those countries had engaged in unfair practices, allowing U.S. customs officials to begin collecting taxes on that steel pending a final determination expected in May.

The German foreign minister objected forcefully, calling on other European countries to appeal the U.S. decision to the World Trade Organization. Yet experts in the United States noted that the levies affect only a small quantity of steel – the bulk of it from Germany and France, which sold U.S. customers products subject to the duty worth $196 million and $179 million, respectively, in 2015, according to Commerce. Experts also noted past U.S. presidents have also used this kind of retaliatory tariff aggressively to protect domestic factories and workers.

Trump’s actions so far “reflect for the most part a fairly conventional approach,” said John Veroneau, a former deputy U.S. trade representative under President George W. Bush. “At this point in time, there’s been no decisions that I think would confirm the worst fears of folks worried that this administration was going to take a very sharp protectionist turn.”

‘IT’S JUST A STUDY’

There was a hint of more protectionist policy in Trump’s actions later Friday with respect to retaliation and other aspects of international trade.

One of Trump’s actions orders a review of whether those retaliatory duties are being adequately collected. A second will instruct the administration to examine whether unfair policies are contributing to the U.S. trade deficit with specific countries – that is, the amount by which U.S. imports from each country exceed exports to that country.

The conceit of Trump’s measures caused consternation among some proponents of free trade, who argue that trade deficits are not primarily a result of tariffs, subsidies and other forms of manipulation, but rather the fact that the United States can borrow cheaply from foreign countries – a good thing for American consumers and investors.

“While it is important to examine the causes of our trade deficits, we know that there are many causes that have nothing to do with trade agreements – including the status of the U.S. dollar as the world’s reserve currency and the widespread use of the U.S. dollar internationally,” said Rep. Kevin Brady (R-Tex.). “In fact, our trade agreements have been successful in making it easier to sell ‘Made in America’ products and services.”

Yet since Trump’s actions will have no practical effects besides gathering more information, the response was muted, including from those supportive of the effort.

“We’re looking forward to seeing the results of it, but it’s just a study,” the AFL-CIO’s Lee said. “We’re going to judge in the end on concrete actions and what the impact on workers is.”

Barfield of AEI said he thought the protectionists might have the upper hand in the White House’s internal debate, noting that Trump himself has been a vocal skeptic of international trade for almost three decades.

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